Weekend briefing: Global manufacturing loses momentum

Economy / news

Lower demand trims PMIs in US; Canada's labour force grows more than jobs; China struggles for momentum; heat leaves Aussie housing markets; UST 10yr 4.21%; gold up and oil dumped; NZ$1 = 62 USc; TWI-5 = 70.7

2nd Dec 23, 7:58am by David Chaston

Sculpture at Gibbs Farm, by Neil Dawson, Horizons, steel piece measures 15m x 10m x 36m

Here's our summary of key economic events overnight that affect New Zealand, with news there were a flurry of factory PMIs released overnight confirming a global manufacturing downturn remains but it is minor.

But it is not minor in the widely-watched US ISM version as that reports a noticeable shrinkage across the board. The internationally benchmarked S&PGlobal (ex-Markit) version however records barely a drop. But it does confirm lower demand.

In an overnight speech, Fed boss Powell signaled that they are likely done raising rates, but his comments were laced with caution.

Canada's labour force grew at a faster pace than expected in November, faster than the good +24,900 increase in employment. Payrolls swelled much more, but the number of self-employed fell rather sharply. That meant that their jobless rate inched up to 5.8%. This wasn't unexpected.

In China the Caixin factory PMI diverged from the official NBS version again, and again was more positive. But to be fair it is just oscillating around a steady state with this an 'up' month. However this report does note "a sustained rise in new orders".

Meanwhile, Beijing has pledged to target ¥1 trillion in manufacturing and infrastructure development. Along with some supply knocks in Panama, this has helped jerk up the price of copper overnight to US$8,615/tonne, it highest since August. (But still a long way below the US$9400/tonne it reached in January.)

Overall, China's economic performance remains problematic, and along with the implied criticism he received from Party elders during their summer retreat, it now looks like President Xi is delaying a major set-piece economic conference (the "third plenum"), one where Xi's new team (the one appointed at the "second plenum") releases its longer-term economic plans.

South Korea yesterday released export data for November and it is very encouraging for global trade. Overall exports rose +7.8% from a year ago to a 14-month high and acing market expectations of a +4.7% rise. This was the second consecutive month of expansion in exports, marking the fastest growth since July 2022. amid an improvement in sales of global chip sales, with semiconductor exports rising for the first time in 16 months. Sales of semiconductors grew +12.9%, while exports of car and rechargeable batteries surged by +21.5% and +24.8%, respectively.

In Australia, CoreLogic is reporting that in November the heat came out of their housing market as values across Melbourne dipped and Sydney slows.

And we should note that Australia faces it final RBA rate review in Tuesday and markets don't expect their 4.35% rate to be changed. This is the last of their monthly reviews. In 2024 they change to a meeting schedule much like the RBNZ one.

The UST 10yr yield has fallen -13 bps from yesterday, now just under 4.21%. That is a massive -22 bps retreat for the week and is now at a 2½ year low. The key 2-10 yield curve is less inverted at -34 bps. (It was inverted by -48 bps last week.) Their 1-5 curve inversion is unchanged at -87 bps. But their 3 mth-10yr curve inversion is now -116 bps and much more inverted. The Australian 10 year bond yield is now at 4.43% and down -6 bps from yesterday. The China 10 year bond rate is unchanged at 2.70%. And the NZ Government 10 year bond rate is up +11 bps at 5.10%. A week ago it was at exactly the same level.

Wall Street has opened its Friday session with the S&P500 up +0.4% and a weekly rise of +0.7%. Overnight, European markets were all up strongly led by Frankfurt which was up +1.1%. Paris lagged, only up half that. Yesterday, Tokyo ended its Friday session down -0.2% to end its week down -0.8%. Hong Kong fell -1.3% on Friday to end down an eye-watering -4.8% for the week. Shanghai ended unchanged for a modest weekly slip of -0.2%. The ASX200 ended its Friday session down -0.2% to cap its weekly gain at +0.5%. The NZX50 did much better, up +0.3% on the day to end up a creditable +1.4% for the week and the best of the equity markets we follow.

The Fear & Greed index we follow has stayed in the 'greed' side as risk appetites remain.

The price of gold will start today just on US$2060/oz and up +US$20/oz from this time yesterday and nearing its all-time high. A week ago it was at US$2000/oz, so a +3.0% gain since then.

Oil prices firmed +50 USc from yesterday at just on US$76.50/bbl in the US. Then they suddenly dropped to US$74.50/bbl.The international Brent price was just over US$81/bbl. But after the sudden shift it is now down to US$79/bbl.

The Kiwi dollar starts today at 62 USc and up +20 bps from yesterday. A week ago it was at 60.7 so a +1¼c gain from then. Against the Aussie we are marginally softer at 93 AUc. Against the euro we are up +½c to 57 euro cents. That all means our TWI-5 starts today just on 70.7 and up +20 bps from this time yesterday, up +100 bps in the week.

The bitcoin price starts today at US$38,773 and up +2.6% from this time yesterday, and a break out of the tight range it was in this week. A week ago it was at US$37,928 so a lesser +2.2% rise from then. However, much of this is just a reflection of the USD slippage. In NZD it remains in its recent meandering range. Volatility over the past 24 hours has remained modest at just on +/- 1.8%.

If you have access, this is worth a read; the greatest mountain climbing achievement - ever. It will probably be ignored by most outside the climbing fraternity.

Daily exchange rates

Select chart tabs

Source: RBNZ

Source: CoinDesk

The easiest place to stay up with event risk is by following our Economic Calendar here ».

We welcome your comments below. If you are not already registered, please register to comment

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

41 Comments

by Flying high | 2nd Dec 23, 8:17am 1701458270

Crude Oil and 10 year T bond have fallen out of bed. Big moves overnight

by Justa comment | 2nd Dec 23, 11:39am 1701470350

Yes with the stronger NZD the petrol price in NZ looking good for next week. Good news.

by Flying high | 2nd Dec 23, 12:00pm 1701471637

Nzd over 62USD

What did the rbnz just do, they sold kiwi and bought greeenback 🤣 obviously expecting they would need to support the kiwi

Clowns

by Blackdog | 2nd Dec 23, 4:04pm 1701486262

RBNZ should be buying Gold like everyone else. NZ produces 10 tonnes a year, that'd be a start.

by J.C. | 2nd Dec 23, 9:41pm 1701506516

Delete comment

by powerdownkiwi | 2nd Dec 23, 12:49pm 1701474543

Next week?

Ever though of thinking longer?

by tomjones_04 | 2nd Dec 23, 8:53am 1701460403

It appears that China is pivoting away from dead money property investment, and into productive business. Wow, imagine having that vision in NZ. We are so backward facing. Ultimately it's going to be NZ's downfall... the wealth effect instead of building wealth.

by Flying high | 2nd Dec 23, 12:03pm 1701471812

China government is pivoting away from... fixed for you

The Chinese people will NEVER pivot away from property investment in fact they see the value that we sometimes miss. Just as well they are out of our market. Though my Chinese girlfriend has her sights set on getting nz residency

by tomjones_04 | 2nd Dec 23, 5:43pm 1701492208

That's a great comment. You will have a better understanding than me with having a Chinese girlfriend. I only cherry pick what I read online. What value are we missing? The value per m2 etc?

by oscar87 | 2nd Dec 23, 7:25pm 1701498304

It may be more to do with cultural attitudes than outright investment skills. Try reversing the situation - if you met someone overseas with a kiwi partner, would you automatically take their partner as a good authority on the NZ property market?

by Flying high | 3rd Dec 23, 7:28am 1701541693

Put it this way I have a budget to spend on a moderately priced beachhouse in Coromandel or Raglan without any debt. The better half wants to use the money to buy 3 or 4 average houses with debt and equity She's right but doesn't get the final final say

by agnostium | 2nd Dec 23, 9:07am 1701461231

https://i.stuff.co.nz/opinion/301019123/reductio-ad-absurdum-and-the-un…

I don't understand how this guy is so surprised. It was 100% clear from the election campaign that Luxon was the worse National leader in living memory. There can be absolutely no surprise that we've ended up with a coalition that is proposing some of the worse policies in living memory. And to try to pin this on Peters is absurd. Luxon didn't have to go with Peters or Act. Luxon choose to because it enabled them to get policies they wanted but would never have been able to get over the line themselves.

Chris Bishop was a tobacco lobbyist. Does anyone really believe the tobacco law repeal had nothing to do with him?

National under Luxon is only interested in money, protecting the interests of their rich donors and industries that pay them off. Act and NZ First are just the cover they use to try to get away with it.

by kiwikidsnz | 2nd Dec 23, 9:34am 1701462872

"Disclosure: this was a political broadcast brought to you on behalf of the Labour party"

Taylor had nothing to say about the "disproportionate amount of power" given to the last Govts minor partners.

"...the New Zealand on Air board, a completely independent organisation."

The media received taxpayer money from NZOA in return for a hyper-radical political view of “te tiriti” and NZ:. See: https://d3r9t6niqlb7tz.cloudfront.net/media/documents/2022_03_Irirangi_te_Motu_NZ_on_Air_Te_Tiriti_Framework_and_evidence_for_News_M_EPcNdaD.pdf

by powerdownkiwi | 2nd Dec 23, 9:47am 1701463635

I think 'honest' is the key.

Yes, white folk from Europe overcame the earlier arrivals (I disagree with Taylor there; Maori are not indigenous). Yes, they set up rules which advantaged white folk - partly because the rules reflected white-folk culture, partly by force.

What neither current-debate 'side' understands - at least publicly - is that this was merely the last of a long, long history of such overtakings. The Woke brigade have chosen to salve their consciences by fiercely rewriting the most recent take-over; what they don't acknowledge is the fact that society, as constructed, is screwing the chances of EVERY future generation - a so many orders-of-magnitude-bigger problem.

by Foxglove. | 2nd Dec 23, 10:48am 1701467304

Paul Johnston in a History of the American People argues that only time will even out the cultural differences, for want of a better word, between the indigenous and the colonists, or invaders as you might argue for Great Britain , from the Celts through to the Normans. However the passage of time for that particular type of percolation, is neither predictable nor harmonious. In the USA for instance the subsequent and prolific introduction of African negroes for nothing more than to provide power as in energy, has in turn created social disorder for which time passing by, has hardly offered any alleviation.

by Foxglove. | 2nd Dec 23, 9:47am 1701463633

Does Winston smoke Winstons?

by Yvil | 2nd Dec 23, 7:38pm 1701499126

"Luxon was the worse National leader in living memory"

He's been in office for one week !!! What a ridiculous comment judging someone's performance on their first week at work.

by Foxglove. | 2nd Dec 23, 7:53pm 1701500001

Stand easy. Obviously that same critique of the previous government, on this site often enough too, raised more than a few hackles. So it is being fired back, as to be expected, but without much imagination as to new ammunition as far as verbiage.

by Yvil | 2nd Dec 23, 8:14pm 1701501280

The question is: was the previous government being labelled "the worst Labour government in living memory", after their first week in office, or only after several years into their term ?

by Foxglove. | 2nd Dec 23, 8:29pm 1701502160

No it wasn’t. But as suggested this barrage, as far as new material, is neither imaginative nor original.

by Baywatch | 2nd Dec 23, 9:18am 1701461908

To argue that we needed people to continue smoking so we could collect a billion dollars in tax, to fund tax cuts, brought back to me a phrase I learned in my Latin class back in the 60s.

“Reductio ad absurdum” – if we are going to justify smoking as a tax generating revenue why don’t we go the whole hog and start selling methamphetamine in our hospitals.

The country deserves this Coalition

by powerdownkiwi | 2nd Dec 23, 9:37am 1701463032

Ignorance gets what you'd expect.

The fact that some choose ignorance even when offered an alternative, is the thing I can never assimilate.

I don't think this ideological, lobby-bound rabble have three years in them. And by acceding to the tobacco lobby, Luxon has already shown us his moral compass (must have bought it off Jack Sparrow...).

by Hastings | 2nd Dec 23, 10:27am 1701466075

This coalition has no interest in making NZ a decent place to live for the average citizen. With ambition, greed and external influence driving the agenda, it won’t be long until they’re seriously compromised and exposed. The first week alone was breathtaking.

by Flying high | 2nd Dec 23, 10:33am 1701466410

If you say so.

Read Mary Holm column today, suggestion that house prices have a controlled drop of 50 percent and mortgages reduced by the same amount. Pure fantasy fun. Working through the scenario shows it can't be done.

by J.C. | 2nd Dec 23, 11:26am 1701469614

Read Mary Holm column today,

Who applies boomer wisdom and experience to investing. One has to wonder how relevant it is to anyone but the boomers.

Perhaps I should read before commenting but suggesting that house prices have to be 'manipulated down' shows a serious problem with our monetary system.

by Flying high | 2nd Dec 23, 11:46am 1701470780

read before commenting

ah yes

by Baywatch | 2nd Dec 23, 11:46am 1701470810

Yes many cashing in their Kiwisaver accounts recently will be wondering abouts Mary's years of investing advice?

by J.C. | 2nd Dec 23, 11:57am 1701471460

Yes many cashing in their Kiwisaver accounts recently will be wondering abouts Mary's years of investing advice?

Sure. KS fund performances will probably not be great. They will cash in and Mary will tut tut about their weak hands. She will point out that stocks always go up over the long term and the down times are the best time to be buying. You cannot discredit her narrative. However, at comparative ages, the millennials have it stacked against them compared to boomers.

Anyway, what if she's wrong? What if it is different this time?

by powerdownkiwi | 2nd Dec 23, 12:54pm 1701474875

I sent a text to Mulligan/RNZ/Afternoons, about 6 years ago when she was opining about the future.

I asked if she knew about the Limits to Growth?

He asked her; "not in my skill set" she replied.

And it - very obviously - still isn't.

I wonder, often, about the thin division between choosing ignorance, and lying; in term of impact, too often the difference is nil.

by J.C. | 2nd Dec 23, 2:01pm 1701478872

I asked if she knew about the Limits to Growth?

He asked her; "not in my skill set" she replied.

Agree entirely and it's something that is also "not in my skill set" in terms of comprehensive understanding. Big difference is that I'm aware and not dogmatic like these financial / investing experts who seem to double down on very broad business cycle patterns and the infallibility of the Anglo-Saxon driven paradigms of how people allocate and generate wealth.

by powerdownkiwi | 2nd Dec 23, 3:21pm 1701483680

It amazes me that you can put stuff under the noses of folk who claim to be journalists, or economic advisors, or both....

and not only do they not do the research; they keep on peddling the vernacular.

by Justa comment | 2nd Dec 23, 11:41am 1701470467

Yes a real chance this could be a 1 term government.

by Yvil | 2nd Dec 23, 8:15pm 1701501334

They have about 150 weeks left governing, maybe it's a bit premature to judge them after their first week ?

by Justa comment | 3rd Dec 23, 10:20am 1701552056

I think that ACT has been given too much, for an 8% party. Could be telling.

by agnostium | 2nd Dec 23, 10:32am 1701466324

What happened to David Hargreaves Toxic Trio article. It just popped up and then disappeared?

by Flying high | 2nd Dec 23, 10:36am 1701466572

Bidens deep state got onto it

by J.C. | 2nd Dec 23, 11:52am 1701471127

The price of gold will start today just on US$2060/oz and up +US$20/oz from this time yesterday and nearing its all-time high.

Gold looking at its highest daily close ever - USD2,070+.

New all-time high for gold now as price reaches USD2,089 in current trading session.

by Rob Reid | 2nd Dec 23, 7:20pm 1701498046

Pretty soon people will be getting mugged for their fillings.

by Foxglove. | 2nd Dec 23, 8:02pm 1701500559

David Lange explaining his experience at lunch in the USA - they serve salads so big, that if you took one outside, you would risk being mugged by a rabbit. Where have all our personalities gone?

by Rob Reid | 2nd Dec 23, 9:17pm 1701505069

LOL.

Oops! I mean, as a vegetarian I find your comment extremely offensive.

by J.C. | 2nd Dec 23, 11:46am 1701470765

Pending homes sales in the U.S. are now at the lowest level for 20 years. Basically fallen off a cliff.

“During October, mortgage rates were at their highest, and contract signings for existing homes were at their lowest in more than 20 years”.

The U.S. Pending Home Sales Index has fallen by 44% from its peak, which makes current drop largest maximum drawdown in history. And the overall level is also at its lowest in history.

https://www.zerohedge.com/personal-finance/us-pending-home-sales-index-…